Mutual Fund News

Non-bank fund companies hit by redemptions

Some of Canada's largest non-bank mutual fund companies suffered heavy net redemptions in January - the first month in the key RRSP season.

AIMFundsManagementInc. led the pack with $743.5-million in net redemptions followed by CI Financial Income Fund with $490-million, and IGM Financial Inc. with $346-million in outflows.

"When you have rocky stock markets, it's not surprising that you have got net redemptions in funds," Dan Hallett, a Windsor, Ont.-based fund analyst, said yesterday.

While the industry posted $460.5-million in net sales in the month, most of the money went to money market investments, while long-term funds saw $4.3-billion in net redemptions - the worst month since January, 1995, according to the Investment Funds Institute of Canada (IFIC). Bank-owned fund companies weren't as hard hit in overall net sales because of their popular money market funds.

AIMFunds spokeswoman Aysha Mawani said her firm's outflows stem from the out-of-favour value style of its Trimark-branded funds.

"While our offerings are diversified across the growth [AIM-branded funds] and value spectrum, a large part of our assets are in the Trimark funds," Ms. Mawani said.

Mr. Hallett agreed that AIMFunds has suffered from Trimark's out-of-favour style, but added that the uncertainty from manager departures has also been a problem.

Last month, Tye Bousada, lead manager of the flagship Trimark Fund, resigned. His departure followed similar moves by chief investment officer Patrick Farmer in October, and manager Geoff MacDonald last August.

"The concern is ... more their ability to retain the very good people that they have left there," Mr. Hallett said.

There is concern about possible departures by other senior Trimark fund managers like Richard Jenkins, Ian Hardacre, Heather Hunter and Judith Adams, said Mr. Hallett, who has put all his recommended Trimark funds "under review."

But Peter Loach, managing director of fund research at BMO Nesbitt Burns Inc., said the net redemptions are not nearly as bad as they appear.

"It was a weak month ... but the factors behind the numbers don't support that funds are being redeemed en masse," Mr. Loach said.

Many fund companies, including CI Financial, suffered from net outflows stemming from principal protected notes using asset allocation strategies that "decreases their exposure to underlying funds due to weak markets," he said.

As well, fund companies like CI and Fidelity Investments Canada Ltd.'s redemption numbers were also affected by a decision by Desjardins Funds to shift money run by those firms to in-house managers.

Fidelity also had a number of clients in its institutional business who chose to shift from mutual funds to its institutional pools, Fidelity spokesman Chris Pepper said.

Dennis Yanchus, a statistics analyst at IFIC, said the long-term net redemption number shows that there is a "lot of rebalancing rather than a movement out of the industry."

January also experienced $4.8-billion in net sales of money market funds.

The outflows in long-term funds are related to the market correction last month, Mr. Yanchus said. "There is still a lot of uncertainty."

January redemptions

AIMFundsManagementInc.: $743.5-million.

CI Financial Income Fund:

$490-million.

IGM Financial (Investors Group and Mackenzie): $346-million

Fidelity Investments Canada Ltd.: $282.3-million

AGF Management Ltd.:

$263.3-million

Franklin Templeton Investments Corp.: $261.2-million

AIC Ltd.: $151.6-million

Bank of Montreal (BMO Investments and Guardian Group of Funds): $115.4-million.